Cfo and ceo better together ima 2013 10-23

Partnership of CEO and CFO
Institute of Management Accountants
10/23/13Steve Little
1

 Principal Consultant, Strategic
Solutions Group, InfoWorks, Inc.
 30+ Years Experience (Ingram,
Andersen Consulting, Fleetguard)
 CEO, Chairman, Executive Management
 Consulting
 Strategy
 Business Analytics
 Technology
 Non-Profit Boards
 Bible League International, Crete,
Illinois
 World Bible Translation Center, Fort
Worth, Texas
10/23/13Steve Little 2
 Professor at Lipscomb
University
 Policy & Strategy
 Principles of Management
 Business Statistics &
Management Science
 Research
 The China Experience

Proverbs 31:10-31 (heavily paraphrased)
 A CFO of noble character who can find? She is worth far more than
generous stock options.
 Her CEO has full confidence in her and is always well informed. She
brings him good, not harm, throughout her tenure as CFO.
 She develops a good staff and works with eager hands.
 She is resourceful, providing for every company need and ensuring that
her staff is equipped to be successful.
 She considers a company, with due diligence, and buys it; out of the
increased earnings she funds strategic initiatives.
 She sets about her work vigorously; her spreadsheets, analyses, and
business acumen are more than sufficient for her tasks.

 She sees that her investments are profitable, and her cash flows do not
disappear when times are bad.
 In her hand she holds the iPad and grasps the stylus with her fingers.
 She opens her door to all who need counsel, she does not turn a deaf
ear.
 When the economy stumbles, she has no fear for her company; for all
necessary preparations have been made.
 Her CEO is respected by all stakeholders, including the
shareholders, where he takes his seat among the board directors.
 She compiles the annual report, presents it to the shareholders, and
meets with Wall Street analysts quarterly, providing impeccable
guidance.
 She is known for her integrity and skill; she is enthusiastic about the
days to come.

 She speaks with wisdom, and faithful instruction is on her tongue.
 She watches over the affairs of the company and does not eat the
bread of idleness.
 Her colleagues arise and call her blessed; her CEO also, and he
praises her: “Many CFOs do noble things, but you surpass them all.”
 Fancy spreadsheets can be deceptive, and earnings management is
fleeting; but a CFO who knows, respects, and speaks the truth is to
be praised.
 Honor her for all that her hands have done, and let her works bring
her praise throughout the company and at the annual Lipscomb-
sponsored Updating the Professional Accountant conference.

The role of a chief financial officer (CFO) has been evolving
in business. No longer is the CFO only the senior finance
guy or gal. In many growing businesses, the CFO is the
partner of the CEO in helping lead the company to meet
business goals. The CFO may supervise departments --
such as human resources or information technology -- in
addition to handling the finances. The CFO may also help
steer a company through mergers and acquisitions or an
initial public offering.
~ Inc., February 16, 2010

The biggest challenge that CFOs face in working with
their CEO…
Moving from tactical to strategic may be the biggest
challenge, since the CFO needs to act as the financial
headlights for an organization. The CFO must be part of
the leadership team, participate in value creation,
understand the organizational mindset, operations and
people management, and visualize what change may lie
ahead. CEOs look for a business partner, coach and
advisor in a CFO who provides a finance-driven
perspective in how a company can set and achieve its
goals.
~ Bates Communications

 You must be at ease with the aloneness being CEO requires.
 You are the primary role model. You set the tone. You must be
the standard bearer of corporate culture.
 You must possess exemplary personal values and habits.
 You must possess a healthy ego and genuine humility. You
must put the success of the organization above your own.
 You have primarily position, not personal power.
 You must possess high emotional intelligence.
 You must put a highly effective leadership team in place. You
are responsible for team performance. You are responsible for
everything else on your watch.

 You must serve, cultivate and answer to many
constituencies.
 You must lead development of the mission and vision.
 You must continue to learn.
 You need an outside confidant. You need an outside
executive coach as situations arise.
 You are responsible for successful execution by the
organization. You must personally execute everyday.

 It’s bad execution. As simple as that: not getting things done, being
indecisive, not delivering on commitments.
 Failure to put the right people in the right jobs…then waiting too
long to fix the people problems.
 The motto of successful CEOs: People first, strategy second.
 Execution is most important. Strategies quickly become public
property.
~ Ram Charan and Geoffrey Colvin, Fortune, June 21, 1999
How can a good CFO keep the CEO from failing?

"Selecting a winning CFO is one of the most important
aspects of a CEO's job," says Amy Errett, a serial
entrepreneur who has hired several CFOs in her various
businesses. Errett is now a partner with Maveron, a
venture capital firm started by investment banker Dan
Levitan and Starbucks Corp. chairman Howard Schultz.
"A great CFO is an integral part of creating a world-class
management team that can make or break a business.
Finding exactly the right person is a difficult task and
requires a CEO's ability to understand the most
important skills you are looking for in recruiting this
critical job."
~ Inc., February 16, 2010

 Leadership skills. At the CFO level, these skills are paramount,
as this executive will lead teams and manage people.
 Experience in specific industry. This may be important to your
business, although you may want to broaden these criteria to
include hiring someone in a similar industry.
 Accounting skills. More and more CFOs are certified public
accountants (CPAs). One reason this qualification may be helpful
to your business is due to the changing regulatory environment,
both in the U.S. and the push for global accounting standards.
 Communication and presentation skills. A CFO must have the
skills to deal with a board of directors or outside investors to
present complex information in a way that can be understood.
(Example)
 Involvement in industry organizations. This is an important way
for a CFO to benchmark your business against best practices in
the industry.
~ Inc.

What are the characteristics of the super CFO?
 Deep understanding of the business
 Knowledge of the high tech industry and market dynamics and
operational drivers of success
 Strong analytic focus
 Flexibility
 Communication and team-building skills
 Customer orientation
 Appreciation for change management
~ CFO Enterprise, LLC

Additionally, a solid CFO will have the skills and the experience to
manage several functional areas within an organization:
 Finance and Accounting
 Internal Controls
 IT
 HR Responsibilities
 Legal
 Customer Service
 Banking Relationships
 External Accountants and Attorneys
 Special Analysis and Reports
~ CFO Enterprise, LLC

What advice do you give CFOs who want to move into the CEO
role someday?
To move into a CEO role, the CFO must be operationally driven
and have leadership skills to drive change. CEOs are typically
outward and forward-looking folks with a clear vision of where
they want to lead their company, and a strategic CFO will be
similar in these leadership traits and bring a holistic viewpoint
to the future success of the business.
~ Bates Communications

1.Uncompromising integrity and ethical standards — A good CFO
must be honest, ethical and able to develop and maintain the trust
and confidence of all constituents. It's not in the job description, but
a good CFO knows he is the custodian of everyone's money. The
best CFO understands he owes allegiance to all constituents and
that sometimes his role is to deliver bad news to the CEO — even if
it means risking his job — because it will benefit the stakeholders.
2.Financial accounting, cash management and corporate finance
competence — A successful CFO must possess fundamental
accounting knowledge, cash management skills and the ability to
manage the financial function. A CFO need not be a CPA, but the
person absolutely must know how the numbers are generated and
be able to communicate effectively with managers, creditors,
shareholders and others.
~ 10 Qualities of an Effective CFO, Rating System Shows Who’s Up to the Job
by Marc Pfefferle (TMA International Headquarters)
Jun 1, 2003

3.Basic business knowledge and strong understanding of company
operations — To be effective, a CFO must understand business
fundamentals, a company's basic operations and its business model. A
CFO who merely reports numbers and has no interpretive ability
does not add value.
4.Strategic vision and leadership skills — The best CFOs can think
strategically, help create and execute business plans and demonstrate
strong leadership within the financial departments and with the
management team as a whole. The CFO can't just be a "numbers
guy"; he's got to be a negotiator. CFOs who stay in their offices all
day, demonstrate no executive presence, hoard information or are
arrogant or condescending are generally ineffective.

5.Problem-solving abilities — A CFO's knowledge of the company, its
resources and the numbers is critical in formulating a plan to secure
a company's future. Good CFOs look for "win-win" situations, rather
than trying to get a "good deal."
6.Communication skills — A CFO must be able to communicate the
financial performance and resources of the company to all key
constituents orally and in writing. A good CFO will give you the
answers before you ask the questions; a bad CFO will make you feel
that if you hadn't asked, you would never have found out.
7.Strong work ethic — A CFO must be willing to work long hours when
necessary, processing a tremendous amount of work product while
paying extreme attention to detail. A CFO who only works eight-hour
days will not accomplish the objectives.

8.Self-confidence and willingness to take a stand — To gain and keep
the trust of all constituents, including the company's employees, the
CFO must be self-confident without being arrogant. That means the
ability to transmit appropriate messages to appropriate audiences, a
willingness to admit mistakes and the ability to offer input without
insisting on being right.
9.Results-oriented mindset — A company needs a CFO who is
committed to results first. The CFO who elevates process above all
impairs his ability to see problems, which is a problem in itself —
especially in times when the company's procedures are likely part of
what got it into trouble in the first place.
10.Reliability — A CFO who works reliably under pressure to produce
timely, accurate information and is willing to do whatever is
necessary to bring about results is invaluable. The right CFO not only
wants change, but also can help set the ball in motion.

 Close to perfect financial reporting
 Expert advice on accounting and financial matters
 No mistakes or surprises
 Quick, right answers (and more critical…right questions)
 Honest-based loyalty, and ability to carry forward the
CEO/Company flag
 Internal and External eyes and ears for CEO
 Highly communicative, coupled with brutally honest
counsel/conscience for the CEO

 Make sure the C-Staff knows and respects the significance of
the role of the CFO
 Don’t let any C-Staff member make any plans or decisions
which have financial implications without the involvement and
sign-off of the CFO
 CFO needs to be used by CEO as a sounding board
 Don’t treat the CFO as a “numbers guy” (and definitely no
bean-counter jokes)

 Frequent surprises are a deal-breaker
 Character issues
 Bad advice and bad answers are a deal-breaker
 Fudging “bad” numbers – yield not to temptation, or be terminated
 Disloyalty/violating the CEO’s trust, confidence and confidentiality
 Disloyalty/violating the CFO’s trust, confidence and confidentiality
 Forgetting that the gap between #1 and #2 is significant
 Failure to enunciate and model CEO rule for all C-Staffers: No “ex
parte’” decisions – that is, all situation-relevant C-Staff stakeholders
must be involved in any decision-making that affects their respective
areas – this could mean the CEO and CFO + 1, or all C-Staffers en
masse

Legal
Ethical
Achievable
Risk Appropriate
Net Present Value Enhancing

L
 Within the letter and intent of the laws of the land (from tax
laws to the Foreign Corrupt Practices Act)
 Within guidelines and regulations (GAAP, IFRS, SEC, etc.)
 Consistent, fair application of company policies
 Honored contracts

E
 Fair
 Consistent with behaviors expected/desired of employees,
customers, suppliers, communities, and other stakeholders
 The Golden Rule (Not the one that says, “he who has the gold,
rules.” It’s the other one)
 Example for discussion
Should companies pay a living wage?

 Living wage (principle of need)
 Equitable wage (principle of contribution)
 Sustainable wage (principle of economic order)
Just Wage vs. Minimum Wage

A
 Given the company’s resources, can we deliver what is
promised?
 Funding
 The right people (skillsets and availability)
 Access to needed technology
 The right plan, methodology, or approach
 Appropriate expertise
 Needed level of organizational and individual
commitment/motivation

R
 Can we survive/thrive even if the initiative fails?
 Can we survive/thrive without the initiative?
 Do we understand the risks?
 Did Netflix understand the risk when they changed their
pricing structure?
 Did RIM understand the risk of not aggressively innovating?
Did they understand the risk of a significant outage in
service?
 Often, the most critical initiatives are those involving
significant innovation…where it is difficult to identify and
assess risks…
What can the CFO do when risks cannot be well
defined? 10/23/13Steve Little 29

N
 Will this initiative enhance NPV?
 Resources are limited. Compared to other opportunities, does
this imitative provide a favorable risk-adjusted NPV?

Leaders vs. Managers
10/23/13Steve Little
31

"There is a profound difference between management and leadership,
and both are important. To manage means to bring about, to
accomplish, to have charge of or responsibility for, to conduct. Leading
is influencing, guiding in a direction, course, action, opinion. The
distinction is crucial."
And in one of his most famous lines, he added,
"Managers are people who do things right and leaders are people
who do the right thing."
~ Warren Bennis

Leaders use their hearts to lead
and
Managers us their heads to manage
Think in terms of: Leaders = Change
Managers = Stability
Together = Controlled Change
Vision without action is a daydream.
Action without vision is a nightmare.
~Japanese Proverb

Cfo and ceo better together ima 2013 10-23

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